healthcare financing

1. Health care Financing in Kenya.
Dr. Daniel Mwai

2. The context:
• The Politics and the Policies
• The Economy
• Financing

3. Political context of financing health care
• Relative stability since independence in 1963
oCentralized government.
• Devolved governance system was ushered in under the 2010
constitution
• the primary aim of addressing some of the historical injustices related to the
distribution of national resources

4. • Counties have considerable control of allocated revenue and internal
resources
• Revenues are allocated from the centre using specific weights:
oPopulation size (45% of the total allocation); basic equal share (25% - shared
equally among counties); poverty index (20%); land area (8.0%) and fiscal
responsibility (2.0%- shared equally to manage debts at the county level)
• Equalisation Fund takes up 1.5% of the total government revenue
oA 20-year allocation from 2013
oPurpose of this fund is to provide basic services such as water, health facilities
and electricity in counties classified as ‘marginalised’.
oHas never been disbursed since devolution (very limited; about ¾ of the country)
is marginalised.

5. • The third allocation of revenue to the county governments is the
Conditional Grants
Free maternity health care, Level 5 hospitals, reimbursement for lack of user fees at primary health facilities, the health sector services fund and certain donor funds. Funding
for most of these services is based on utilisation rates

6. The social context
• Kenya has a high population growth rate (2.5% p.a)
• The population structure is ‘bottom-heavy’
• Very large at the base: close to 70% of the population < 30 years old, and 43%
aged less than 14 years of age
• Marked by high dependency ratio (about 80% of the total population);
meaning a lot of socioeconomic pressure is put on a small working population
• Has negative consequences on the general economy due to lack of domestic
savings and investments

7. • A key feature of the Kenyan population is the high level of poverty
• The UNDP (2014) reports that the national poverty headcount is 47.8 % of the
population (& 43.4% nationwide live below the poverty line of USD 1.25/day
• It means a large segment of the population cannot afford healthcare; struggle to
pro-actively prepare for health care, if required to do so
• Wide economic disparities: richest 10% controls 36% of the country’s
total wealth (poorest 10% own less than 2.0%) (The African
Development Bank (2008)
• The Gini-coefficient of 0.51 is only lower than that of South Africa and
Namibia as of 2006

8. • However, significant improvements in certain social development
indicators
oLiteracy and Millennium Development Goals (MDGs)
oHealth indicators: improved immunisation coverage; decreased infant
mortality rates (IMR) and under-5 mortality rates (U5MR) and a decrease in
the prevalence of HIV/AIDs infection rates
• Relatively low levels of life expectancy at birth in Kenya
• High disease burden (HIV/AIDS) and worsening economic conditions (erodes
purchasing power and lowers standards of living)
• Partly attributable to under-funding of health sector- services are inaccessible

9. The economic context
• A lower-middle-income country with a of GDP per capita income
US$2,300 as of 2014
• Lost its status as the most important destination for Foreign Direct
Investment (FDI) to Uganda and Tanzania
oInstability & ease of doing business
• Fairly stable GDP growth rate: influences government’s revenue and
spending levels
• Comparably lower growth rates in Kenya have been attributed to
recurrent drought and political instability

10. 0
1
2
3
4
5
6
7
8
9
10
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Kenya
East Africa
Africa
Real GDP growth rates 2013 (and projections for 2014)
GDP
growth
rates
(%)
Sources: Africa Economic Outlook, 2013; IMF, 2013

11. • Also exists significant structural problems and macroeconomic
instability
• High unemployment rate (about 40% of the labour force, as
compared to the average rate for Africa as a whole (12%)
• High unemployment rates tend to affect fiscal space for health and
more so, limit progress towards universal coverage

12. Result? Health indicators at a glance
Health indicators, Kenya (2003 - 2012)
Indicator Name 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Life expectancy at birth
(years)
52.1 52.5 53.0 53.7 54.4 55.1 55.8 56.5 57.1 57.7 61.7
Infant mortality
rate(per 1,000 live
births)
63.7 61.7 59.3 57.3 55.5 53.3 51.9 50.1 48.3 49.0 42.2
Under-5 mortality rate
(per 1,000 live births)
102 98.3 94.1 90.2 86.5 82.5 79.4 76.1 72.8 73.0 ---
Maternal mortality ratio
(per 100,000 live births)
414 550 580 320 380 490 488 390 570 600 510
Incidence of
tuberculosis (per
100,000 people)
349 357 359 355 347 332 312 298 288 --- ---
Prevalence of HIV (% of
population ages 15-49)
7.6 7.2 6.8 6.6 6.4 6.3 6.2 6.2 6.2 6.0 6.0
Sources of data: (Yego et al., 2013, World Bank, 2014a, WHO, 2013b)

13. The policies for financial risk protection
Key policy reforms and interventions to improve access to health care for all Kenyans since independence
Year Policy
reform/intervention
Target population Impact
1963 - 1965 Tax financing with
standard user fees
All Kenyans Limited utilisation because of the fees were
unaffordable
1965 - 1989
Exclusive funding from
general government
revenue (user-fees
removed)
All Kenyans at public
facilities
Inadequate health services with rising cost
burdens for government (and households even
with removal of user fees)
Establishment of the
National Hospital
Insurance Fund (NHIF)
in 1966
Compulsory for formal
sector employees;
voluntary for the
informal sector
Increased inpatient financial protection for
members only (mostly those in formal
employment). Coverage is comprehensive for
members seeking inpatient care in public and
low-cost faith-based facilities.
1989/1990
User-fees re-introduced
then suspended in 1990
All Kenyans in all public
health facilities
Utilisation of public health services decreased
at re-introduction in 1989 but increased
following suspension in 1990

14. 1991/1993
User fees were re-introduced in 1991
and implemented in phases beginning
with hospitals. Children under-5 and
services such as immunisation,
HIV/AIDS and tuberculosis were
exempted from payment.
All Kenyans in all
public health
facilities
User fees are a barrier to access
and have negative implications
for equity.
2002/2003
User fees were reduced to the bare
minimum in primary health facilities
under the 10/20 policy but remained
unaltered in higher level facilities
All Kenyans
Increasing utilisation but also
increasing informal charges
because there was not buffer-
fund to take the place of user-
fees
In 2003, the National Social Health
Insurance Fund was proposed as a
pathway for universal coverage in Kenya
All Kenyans in a mix
of tax and social
insurance scheme
funding
Bill to establish the fund was
rejected on sustainability
grounds. No impact on
population health

15. 2005
Establishment of the Health Sector
Services Fund (HSSF) as a buffer fund
to compensate for the reduced user
fee revenue. The HSSF was piloted in
2005 but actual implementation
delayed until 2010
All Kenyans in
public health
services
HSSF provided HSSF should ideally
increase utilisation and lower OOP
payments. However, OOP payments
are increasing
2013 1) Government introduced free primary
care in dispensaries and health centres
which eliminated user fees at these
facilities
2) Free maternity care in all public
sector health facilities
3) Devolution of health services
4) Health insurance for the elderly and
disabled
Targeted all eligible
Kenyans
Removal of user fees is likely to
increase utilisation of services as
had been documented earlier
Baseline reports (Chuma & Maina,
2013) indicate increased number of
births assisted by health workers.
There are currently no
documentations on the implication
of devolution on health care
management and service delivery

16. •Key highlights - Health financing landscape.

17. Key aspects
• The main functions of health care financing:
• resource mobilization and allocation,
• pooling and insurance,
• purchasing of care,
• the distribution of benefits

18. History of Resource tracking in Kenya
Round 1
(1999)
Data for
1994/95
Round 2
(2003)
Data for
2001/02
Round 3
(2007)
Data for
2005/06
Round 4
(2010)
Data for
2009/10
Round 5
(2015)
Data for
2012/13
Adopted the SHA
2011 framework
Re-entering data into
SHA 2011 classification
to compare to Round 5

19. Objectives of resource tracking
Estimate Total Health Expenditure (THE) in Kenya.
Document the distribution of THE by financing sources, financing schemes and
financing agents.
Determine the contribution of each stakeholder in financing health care in Kenya.
Articulate the distribution of health care expenditures by use.
Analyze efficiency, equity, and sustainability issues associated with the current
health care financing and expenditure patterns.

20. Tracks both the AMOUNT and FLOW of funds
through the health system
Function
$
Financing Source
Originators of
health funds: e.g.,
MOF, households,
donors
Financing Agent
$
MANAGERS of funds: Have power and control
over how funds are used i.e., programmatic
responsibilities: e.g. FMOH, insurance companies
$
Health Provider
End USERS of health funds: Entities that provide/
deliver health service . E.g., hospitals, clinics, health
stations, pharmacies
Actual USE of funds: Service
and/or product delivered.
e.g. preventive programs,
curative care, admin

21. The Four Principal Dimensions
• Financing Sources: provide health funds
• Answer “where does the money come from?” e.g., NT, households, donors;
• Financing Agents: have power and control over how funds are used i.e.,
programmatic responsibilities
• Answer “Who manages and organizes the funds?” e.g., County Health Services,
insurance companies;
• Providers: are end users of health care funds, entities that actually provide/deliver
the health service
• Answer “Where did the money go?” e.g., hospitals, clinics, health stations,
pharmacies;
• Functions: are actual services delivered
• Answer “what type of service was actually produced?”
e.g., curative care, preventive care, medical goods such as pharmaceuticals,
administration.

22. Data Sources
• The data sets are as follows
• Primary data collection
• Employer firms (private firms and parastatals),
• Insurance firms offering medical cover,
• Non-Governmental Organizations (NGOs)
• Development Partners.
• Secondary data collection
• Household
• County government

23. Kenya health financing landscape
2015/16

24. KENYA HEALTH SECTOR FLOW OF FUNDS
From the PDF file

25. Summary
• The total health expenditure (THE) in Kenya was KSh 346 billion
(USD 3,476 million) in 2015/16, from KSh 271 billion (USD 3,188
million) in 2012/13.
• Total health spending in 2015/16 accounted for 5.2% of GDP
down from 6.8% in 2012/13.
• The government expenditure on health as a percent of total
government expenditure increased from 6.1% in 2012/13 to 6.7
% in 2015/16.
• Per capita expenditure increased from KSh 6,602 (USD 77.4) in
2012/13 to KSh 7,822 (USD 78.6) in 2015/16.

26. Selected Health Expenditure Statistics, 2001/02 - 2015/16
51.2
59.5
66.3
77.2 78.6
5.1%
4.6%
5.5%
6.8%
5.2%
7.9%
5.1%
4.8%
6.1%
6.7%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2001/02 2005/06 2009/10 2012/13 2015/16
Percent
US
$
THE per capita
(US$)
THE as a % of GDP
Government health
expenditure as % of
THE

27. Distribution of CHE by Institutions providing revenues for financing
schemes
27.1%
31.2% 33.1%
11.4%
10.1%
11.8%
29.5%
32.0%
32.8%
31.9%
25.5%
22.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009/10 2012/13 2015/16
Others
Rest of the world
Households
Corporations
Government

28. Absolute values of CHE by Institutional providing revenues for financing
schemes
Institutional providing revenues for
financing schemes 2009/10 2012/13 2015/16
Percent
change
Government 52,626,655,992 81,833,602,603 107,737,590,872 105%
Corporations 22,132,846,714 26,399,796,770 38,543,607,201 74%
Households 57,257,958,437 83,685,547,331 106,985,863,986 87%
Rest of the world 61,840,778,421 66,784,885,371 72,423,017,507 17%
Others - 3,197,679,185 #DIV/0!
Total 193,858,239,565 261,901,511,259 325,690,079,566 68%

29. Trends in CHE by financing schemes, Kenya
26.0%
34.0%
19.2%
1.0%
1.0%
18.2%
5.0%
5.0%
4.6%
7.0%
9.0%
10.8%
30.0%
19.0%
16.4%
6.0%
3.0% 3.1%
25.0%
29.0% 27.7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009/10 2012/13 2015/16
Out-of-pocket excluding cost-sharing
Enterprise financing schemes
Financing schemes of non-profit institutions
serving households (NPISH)
Voluntary health insurance schemes
Social health insurance schemes
State/regional/local government schemes
Central government schemes

30. Absolute values for CHE by financing scheme
Financing schemes 2009/10 2012/13 2015/16 % Change
Central government schemes 47,536,200,241 85,835,861,745 62,514,025,385 32%
State/regional/local
government schemes 1,491,448,033 2,380,522,437 59,383,073,199 3,882%
Social health insurance
schemes 8,853,183,331 11,850,913,223 15,094,580,000 70%
Voluntary health insurance
schemes 12,618,709,895 22,749,933,355 35,038,031,692 178%
Financing schemes of NPISH 54,889,320,398 48,420,483,672 53,254,950,795 -3%
Enterprise financing schemes 9,965,726,452 6,509,519,027 10,145,891,617 2%
Out-of-pocket excluding cost-
sharing 58,503,651,214 84,154,277,800 90,259,526,878 54%
Total 193,858,239,565 261,901,511,259 325,690,079,566 68%

31. Financing Agents for Current Health expenditures
24.1%
32.4%
18.7%
0.0%
0.0%
18.2%
4.6%
4.5%
4.6%
6.5%
8.7%
10.8%
2.3%
2.3%
2.8%
2.6%
0.2%
0.3%
26.8%
18.5%
16.4%
30.2% 32.1%
27.7%
2.0% 0.0% 0.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2009/10 2012/13 2015/16
Rest of the world
Households
NPISH
Private employers
Parastatals
Commercial insurance companies
NHIF
County Health Department
Local Authorities
Other Central government Ministries
Ministry of Health

32. Financing agents of THE in absolute values
Financing agents 2009/10 2012/13 2015/16 % Change
Ministry of Health 46,751,219,780 84,834,286,166 60,822,656,587 30%
Other Central government
Ministries 451,905,639 1,001,575,579 1,691,368,798 274%
Local Authorities 1,522,358,231 2,380,522,437 -100%
County Health Department - - 59,383,073,199 #DIV/0!
NHIF 8,853,183,331 11,850,913,223 15,094,580,000 70%
Commercial insurance
companies 12,587,961,044 22,749,933,355 35,038,031,692 178%
Parastatals 4,375,511,717 6,098,084,128 9,050,331,357 107%
Private employers 4,996,057,041 411,434,899 1,095,560,260 -78%
NPISH 51,918,144,937 48,420,483,671 53,254,950,795 3%
Households 58,503,651,214 84,154,277,801 90,259,526,878 54%
Rest of the world 3,898,246,629 - - -100%
Total 193,858,239,565 261,901,511,259 325,690,079,566 68%
Ministry of Health 46,751,219,780 84,834,286,166 60,822,656,587 30%

33. Providers of CHE
35.0%
25.6%
20.5%
7.9%
8.8%
11.0%
5.1%
4.8%
5.3%
4.1%
0.9%
8.7%
0.1%
9.8%
16.1%
15.3%
1.7%
4.6%
7.3%
2.9%
3.0% 3.7%
14.0%
14.6% 14.1%
8.7%
20.1% 20.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009/10 2012/13 2015/16
Providers of health care system administration and
financing
Providers of preventive care
Pharmacies
Private Clinics
Private Not for Profit Health Centres and Dispensaries
Government Health Centres and Dispensaries
Community Health Workers
Others
General hospitals - Private Not For Profit
General hospitals - Private For Profit
General hospitals - Government

34. Providers of CHE,
Providers 2009/10 2012/13 2015/16 % change
General hospitals -
Government 67,805,975,865 66,971,487,491 66,641,880,470 -2%
General hospitals - Private
For Profit 15,291,185,606 22,958,588,185 35,867,390,469 135%
General hospitals - Private
Not For Profit 9,835,126,000 12,575,515,487 17,261,574,217 76%
Others 7,855,399,444 2,136,348,680 3,034,306,203 -61%
Community Health
Workers 16,842,827,550 889,528,485 237,927,086 -99%
Government Health
Centres and Dispensaries 19,065,908,429 42,177,558,826 49,993,107,990 162%
Private Not for Profit
Health Centres and
Dispensaries 4,210,049,610 3,268,447,400 4,531,088,063 8%
Private Clinics 3,230,518,111 12,047,111,418 23,704,487,337 634%
Pharmacies 5,664,112,030 7,964,094,061 11,997,592,767 112%
Providers of preventive
care 27,192,956,183 38,170,342,706 45,926,628,533 69%
Providers of health care
system administration and
financing 16,864,180,736 52,742,488,519 66,494,096,431 294%
Total 193,858,239,565 261,901,511,259 325,690,079,566 68%

35. Distribution of CHE by functions,
22.7% 20.3% 20.4%
40.5%
41.4% 39.5%
2.9%
3.0%
2.9%
23.6%
14.7% 16.2%
9.3%
20.1% 20.1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009/10 2012/13 2015/16
Other health care services
Administration of health
finance
Preventive care
Medical goods
Rehabilitative care
Outpatient curative care
Inpatient curative care

36. Health Care Function 2009/10 2012/2013 2015/16 % change
Inpatient curative care 44,047,155,627 53,092,067,054 66,394,156,967 51%
Outpatient curative care 78,558,797,364 108,537,936,514 128,684,909,489 64%
Rehabilitative care 115,037,148 49,338,468 - -100%
Medical goods 5,677,086,660 7,964,094,061 9,412,100,522 66%
Preventive care 45,794,640,919 38,400,312,010 52,619,635,706 15%
Administration of health finance 18,068,809,843 52,742,488,520 65,537,292,138 263%
Other health care services 1,596,712,004 1,115,274,633 3,041,984,743 91%
Total 193,858,239,565 261,901,511,259 325,690,079,566 68%
Distribution of CHE by functions

37. Institutional Units Providing Revenues to Financing Schemes for
Capital Formation
95.4%
45.6%
55.1%
2.5%
2.1%
1.8%
2.1%
39.6%
43.1%
12.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009/10 2012/13 2015/16
Others
Rest of the world
Households
Corporations
Government

38. Institutional Units Providing Revenues to Financing Schemes for Capital
Formation
Institutional units providing revenues
to financing schemes 2009/10 2012/13 2015/16 % Change
Government 6,455,108,223 8,815,237,905 11,048,734,771 71%
Corporations 168,967,408 396,429,251 366,817,876 117%
Households - 34,257,240 - #VALUE!
Rest of the world 140,571,997 7,653,459,854 8,641,052,984 6047%
Others - 2,415,706,892 - #VALUE!
Total 6,764,647,627 19,315,091,142 20,056,605,631 196%

39. DISEASE CONDITIONS

40. Distribution of THE by Diseases/Conditions, 2012/13 and 2015/16
18.7% 20.1%
1.3% 1.4%
12.9% 12.1%
9.8% 10.4%
6.2% 5.7%
0.4% 0.4%
9.5% 8.7%
2.4% 2.7%
9.3% 9.6%
4.1% 3.7%
25.4% 25.4%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2012/13 2015/16
Percent
All Other diseases & conditions
Injuries
Respiratory infections
Diarrheal diseases
Vaccine preventable diseases
Nutritional deficiencies
Noncommunicable diseases
Malaria
Reproductive health
Tuberculosis (TB)
HIV/AIDS

41. Given the current health Financing landscape in Kenya,
• What are the key health financing challenges?
• Which policy options would you prescribe to solve the identified challenges?

42. Other issues to note.

43. Comparative analysis of financing indicators
29.6 29.3 28.8
0
5
10
15
20
25
30
35
40
45
0
10
20
30
40
50
60 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Global (Left)
Africa (Left)
Kenya (Left)
Kenya (Right)
Africa (Right)
Global (Right)
GGHE
%
THE
General Government health expenditure (GGHE) and external resources as % of total health expenditure (THE)
External
resources
%
THE

44. Expenditure relative to GDP
• Kenyan, African and global positions have not shifted much since
2000
• Kenya’s position is the poorest overall
oSpends about 4.5% of its GDP on health care as compared to African and
global averages at 6.0 % and 9.2% respectively (2011)

45. 0
1
2
3
4
5
6
7
8
9
10
0
2
4
6
8
10
12
14
16
18
2000 2002 2004 2005 2006 2007 2008 2011
Global (Left)
Africa (Left)
Kenya (Left)
Global
(Right)
Africa
(Right)
Kenya
(Right)
GGHE
as
%
of
government
expenditure
THE
as
%
of
GDP
General government health expenditure (GGHE) and total health expenditure (THE) trends
Data sources: (Ministry of Health, 2013, World Bank, 2013c)

46. Note:
• Donors funded about 39% of Kenya’s total health expenditure by
2012 even though this has declined to about 25% in 2013
• Private expenditures are known to be inequitable and regressive, and
the more these expenditures are the higher the inequities in a health
system
• Macroeconomic performance relative to expenditure in the health
sector indicates that Kenya has the ability to increase funding for its
health sector without this affecting the functions of other areas of
Government expenditure

47. 0
10
20
30
40
50
60
Lamu
Elgeyo/Marak…
Taita
Taveta
Marsabit
Kitui
Isiolo
Nyeri
Garissa
Embu
Samburu
Kwale
Kisumu
Baringo
Laikipia
Kilifi
Kisii
West
Pokot
Homa
Bay
Kakamega
Nandi
Migori
Meru
Nyamira
Murang'a
Siaya
Wajir
Bomet
Bungoma
Kiambu
Mandera
Busia
Tana
River
Kirinyaga
Tharaka
Nithi
Nyandarua
Machakos
Kajiado
Makueni
Turkana
Uasin
Gishu
Kericho
Nakuru
Mombasa
Vihiga
Trans
Nzoia
Nairobi
Narok
Kenya
THE
per
capita
by
county(US$)
Health expenditure indicators by county (county THE per capita) 2014

48. Thank you.